Bolivia is hope to a brewing resource conflict over its lithium deposits. (Source: NYT)

The Uyuni Salt Flats in Bolivia are home to over half the world's lithium deposits. With the prospects of millions of lithium-powered electric vehicles on the horizon, Bolivia's nationalistic government is considering taking ownership of the resources, while foreign competitors scramble over each other to try to obtain resource contracts. (Source: Detroit News)

The scrappy race to secure lithium deposits may even outdo the race to secure new oil deposits

In the nation of Bolivia, the locals are sitting on a stockpile of white gold. No, they haven't found a hidden gold deposit, but they have claim over something far more valuable -- lithium.

As battery efforts explode worldwide and the industry braces for electric vehicles, the demand for lithium, the current material primarily used in batteries, is at an all time high. The situation is exacerbated by the fact that lithium is a scarce resource, with deposits only in a few locations worldwide.

Oji Baba, an executive in Mitsubishi's Base Metals Unit, describes, "There are salt lakes in Chile and Argentina, and a promising lithium deposit in Tibet, but the prize is clearly in Bolivia."

Bolivia is becoming a hotbed for a brewing economic resource war. While some expect the Arctic oil resources to become the most hotly contested resource, the race for lithium could get just as nasty or worse. On one side is the increasingly nationalistic government; on another side is a plethora of industrialized nations, and on a third front is Bolivia's indigenous people, who expect to receive a cut of the profits.

With over half the world's known lithium sitting beneath the deserts of Bolivia, many nations are desperately trying to make a deal with the government. The Bolivian government is headed by President Evo Morales, who has criticized the U.S. heavily and promoted nationalization of industries. He has already nationalized the oil and natural gas industries, and as he and other Bolivians realize the true value of their deposits. Many fear he will nationalize the lithium supply as well.

Some of the indigenous people are also demanding a cut. States Francisco Quisbert, the leader of Frutcas, a group of salt gatherers and quinoa farmers on the edge of Salar de Uyuni, "We know that Bolivia can become the Saudi Arabia of lithium."

Japan and France, undeterred by Bolivia's increasing hostility towards the U.S. and other nations, have sent business representatives to the nation to try to negotiate resource deals. Their representatives have traveled to La Paz, the capital of the nation, in hopes of brokering such an arrangement.

Mitsubishi is among the ones strongly pushing for exclusive deals. However, many other companies in France, Japan, and even the U.S. also have shown interest -- among them are GM, Nissan, Ford and BMW, all of whom have electric vehicle projects.

For decades, lithium saw small demand for use in mood-stabilizing drugs and thermonuclear weapons. That demand began to creep up as cell phone makers adopt it as their battery material of choice, thanks to its high energy density per volume and weight, compared to other technologies like nickel metal hydride. And now those same lures -- the low weight per energy density -- have lured in its biggest customer yet, the auto industry.

The amount of lithium needed to make the massive battery packs in millions of planned electric vehicles will be unprecedented. And the resource's scarcity is not only increased by its limited geographic distribution, but its difficulty to be harvested. To extract lithium, miners must pump brine -- water saturated with salt -- deep into the desert's ground. The water then is evaporated, leaving behind salt deposits, which contain lithium.

The U.S. Geological Survey pegs Bolivia's deposits at 5.4 million extractable tons. The U.S. has 410,000 tons, while China has 1.1 million and Chile has 3 million.

Juan Carlos Zuleta, an economist in La Paz urges his government to cut a profitable deal with the foreigners. He states, "We have the most magnificent lithium reserves on the planet, but if we don't step into the race now, we will lose this chance. The market will find other solutions."

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Well, I can't agree with you on that. Living in Brazil and seeing what the Bolivian President (Evo Morales) did to nationalize the Natural Gas resources (the army went into production facilities and refining facilities and just took over and the companies received nothing back...Petrobras - Brazilian Oil Company had invested over $800 mil there - all went down the drain oh...and they raised the price of Gas as well), I can only be pessimistic about the lithium industry...And worse, he is very connected with that wacko-trying to stay in the government until death-socialist Chaves from Venezuela.

Well the good news is now that the Oil bubble has popped, Chavez is going broke fast. I was reading something the other day about how he’s kissing up to all the foreign oil firms he nationalized, trying to get them to come back and invest. I bet you he’s also wishing he didn’t fire all those oil engineers that resisted him.

It’s really hard to build infrastructure when you alienate all the people you depend on to build it. What comes around, goes around.

And lets hope they aren't running back to him. That is the risk that you take when dealing with an instable country. Honestly the same could be true of all the US investment in China we will build them a state of the art industralized nation and then they will do as in the past and kick everyone out stealing their investment. Perhaps they will be more subtle and just tax it to death. But that is the greatest fear I have with all this foriegn investment.

Spuke, are you insane? Have you learned nothing about economics since I've been on here? China is our largest creditor. If they don't keep buying our short-term t-bills at 0% interest (it's actually negative, the CPI is BS), then the jig is up on our ponzi treasury market. The only buyer left is the Fed with their magic checkbook, which is pure inflation and will destroy the dollar. The correct solution, of course, is for rates to RISE, government spending to be drastically cut, allow debt to be liquidated, allow jobs and capital to reallocate over many years. It will be painful rebuilding a viable economy, but you should have thought about that when you were shooting up with inflation for 30 years thinking it was fun. Instead, we're doing the same damn things Hoover and Roosevelt did, only worse.

Also, Imagine what would happen if China cut their losses and convert their trillion in dollar reserves on gold. Guess what happens then? The dollar will plunge relative to the yuan, making every Chinese holder of Yuan able to afford the products that they currently make and export to us in exchange for our worthless paper. By leaving the gold standard, we enabled them to finance our government's excess with REAL credit. While we were out expanding our military empire, entrenching our unions, taxing the crap out of businesses, trying to pay off giant welfare schemes, they were working hard and lending us the money to do it at interest. Socialist monetary policy pissed away our entire manufacturing base to that country and you are dead wrong if you think they will be worse off without us. They would have the factories and the means to consume what comes out of them. What would we have?

(1) A worthless currency unable to outbid the world for imports without hocking every asset we own to foreigners.(2) No factories to produce what we were importing on foreign credit that no longer is being extended(3) No savings to invest in those factories, which even if we did have, would take decades to create(4) An angry populace getting welfare checks that can't buy anything because prices have gone up 1000% from the world becoming net sellers of U.S. bonds(5) A government that thinks non-viable jobs should be subsidized by viable ones, windmills are better than nuclear, money should be debt instead of gold, and interest rates should be price fixed, people should pay more taxes for being either gay, single, having less children, invested in exportables over homes.

If the Keynsian brainwash is that bad, if the world actually does loan us the 10 trillion we're asking for to keep financing non-exportable consumption, they will destroy themselves and officially take our place as the dumbest countries on Earth.

Very well put Banshee. I'm guessing you were a Ron Paul supporter last election. I think he was the only candidate who had a clue about economics and domestic policy (unfortunately his antiquated head-in-the-sand ideas about foreign policy such as abandoning NATO and NAFTA, and the peoples' tendency to vote for populist image over substance killed his presidential hopes before he even started).

Unsurprisingly, it came down to a race between two big-government, big-spending, basically identical candidates. Both morons promised to send Ben Bernanke out with Santa's bag full of imaginary money to dump on Wall Street. Only now Congress is beginning to realize that maybe giving away money they don't have to long failing industry and fat cat bankers is not such a good idea. On the other hand Obama and the democrats are already planning the next election campaign, so there is no way they want to pull the plug on the economy and let the market take care of things, because the hordes of unemployed would lynch them next election.

So Flight 1776 will continue its downward spiral until either splash down in the Hudson, or crash and burn in Queens. Back in 2000 when Dubya got elected, it was an easy prediction to say, there will be war before his first term is up. Now the future is more cloudy, but not impossible to predict.

Banshee, you are correct about what would happen should the US default on its debts. But that is just the beginning. The people will want an out. The last time this sort of economic mess happened, it cost 60 million lives to get out of it. It took Germany only half a decade to build its war machine.

This time, we all have a head start. In the past decade, China has doubled its military budget three to four times. Russia has been left with a massive cold war arsenal that they have quietly been upgrading with newly acquired Petro-bucks, and has most recently been seen invading its smaller neighbors, and putting the natural gas squeeze to its bigger ones. Japan is seeing a resurgence in nationalism to go with its already powerful economy and military, Iran is aspiring to become one big suicide bomber, and India is getting ready to have a cow on Pakistan.

The history books will say WW3 was caused by stupid people spending way beyond their means on too big houses, extra properties, hot tubs, big TVs, and RVs, and that they were enabled by self-serving and equally stupid politicians who had way more power than they knew what to do with.

Very eloquently put BansheeX, way better than my response to Spuke which is: don't answer the phone and pretend we're not home and if they try to collect or pretend that it was some other United States that owes them money.

In one he (Chavez) is crawling back to the oil companies, in the other he is allowing them to enter the bidding process for new contracts... I guess it is no surprise investors.com (obviously quite a vested interest in capitalism) take a harder line, but hey.

Oh, and this stuck out (from NY times):

Venezuela also differs from top oil nations like Saudi Arabia and Mexico, where national oil companies have monopolies. Petróleos de Venezuela let private companies remain as minority partners after the nationalizations, despite Mr. Chávez’s often aggressive anticapitalist stance.

Two different outlooks on the same thing. I think it's hilarious nonetheless. He boots them out then asks them to come back. If he's such a hardcore socialist, he would figure out a way to get the job done without outside help. I'm sure someone in Venezuela knows how to run an oil business.

Another part is that he blew all of the money he made and now the country is in serious trouble. LOL! Like the Godfather said, "I don't know karate, but I know crazy."

I guess there's some socialists or some Chavez fans here. Sorry but he's just another a$$hole politician making big promises but is really only out for himself. F%&k him and his dumb sh!t supporters too.

quote: Living in Brazil and seeing what the Bolivian President (Evo Morales) did to nationalize the Natural Gas resources (the army went into production facilities and refining facilities and just took over and the companies received nothing back...Petrobras - Brazilian Oil Company had invested over $800 mil there - all went down the drain oh...and they raised the price of Gas as well),

Because it sure sounds to me like Morales kicked out a couple foreign oil companies that had made sweetheart deals with the previous administration to profit from Bolivian resources. Nationalization of oil resourses was one reason Morales got a post-election jump in aproval rating from 60 to 80%; he went on to keep the promises he made to his electorate (with an 80% approval rating, you know there was hogging going on at the top) in nationalizing other Bolivian industries as well.

As for Petrobras, Morales appearently worked out a deal with Brazil since some of their assets were not nationalized. Furthermore, there tends to be a prefference in South America towards interregional cooperation over dealing with the US, this should come as no surprize given what the US has done in the past.

Petrobras in particular seems to be doing quite well for itself, and is positioning to buy US oil assets. If I had to guess, I'd say the reason the US govt. put a freindly face on in this last election is simply because it can no longer afford to play mr. strongarm.

quote: If I had to guess, I'd say the reason the US govt. put a freindly face on in this last election is simply because it can no longer afford to play mr. strongarm.

We put on a friendly face because we don't give a sh!t what happens in South America. Even Jon Stewart was making fun of Venezuela. Quite frankly, our worldwide meddling will dwindle over the course of the next few decades. We Americans are tired of the governments continuous crappy foreign policies. It will change. Keep an eye out for it.

quote: We put on a friendly face because we don't give a sh!t what happens in South America. Even Jon Stewart was making fun of Venezuela.

Ummm, the American people may not give a shazzbot, but our resource companies do. And Jon Stewart often has a hard time pulling himself out of the mainstream swill that passes for news these days, so he makes blunders all the time.